Road to recovery

FROM THE BOTTOM UP: THE DISTRICTS DEFYING NEW ZEALAND'S HOUSING SLOWDOWN

While much of New Zealand’s housing market continues its gradual recovery from the correction that followed the November 2021 peak, a growing number of districts have quietly moved back into positive territory.

New data shows 19 out of 70 have now recorded house price growth above their post-peak lows, with clear trend a emerging: many of the strongest-performing districts are concentrated in the South Island.

From Southland and Otago to Canterbury and the West Coast, regional markets have demonstrated resilience despite ongoing economic uncertainty, higher living costs and a slower-than-expected national housing recovery.

According to Bayleys Head of Insights and Data Chris Farhi, the results reflect a combination of affordability, demographic shifts and strong regional economic performance.

“There are probably four themes that stand out,” says Farhi.

“The first is that some of the locations that have recovered have traditionally been relatively affordable. Areas such as Southland typically sit at the lower end of New Zealand’s house price spectrum, which has given them more room to grow.

“The second factor is population movement. If you compare the 2018 and 2023 Census results, there was a general shift of population towards the South Island, particularly into areas such as Otago and Canterbury.” The recovered districts are concentrated across six regions: West Coast, Southland, Otago, Canterbury, Taranaki and Northland.

While each market has its own drivers, the broader pattern highlights how housing demand is increasingly being influenced by lifestyle considerations, affordability and regional economic opportunities.

 

THE SOUTH ISLAND ADVANTAGE

The South Island dominates the list of recovering districts, a trend Bayleys Insights, Data & Consulting analyst Samantha Lee says is no coincidence.

“The South Island has generally benefited from two areas.”

“One has been the performance of the agricultural sector and the rural economy, while the other has been tourism, which has remained relatively resilient.

Those factors have provided a nice benefit for many of these regions, particularly compared to larger centres such as Auckland and Wellington, where prices have generally been much flatter over the past year.

The migration story is equally important.

Lee says a growing number of New Zealanders are choosing South Island locations for both lifestyle and affordability reasons, creating a momentum effect that is helping sustain demand.

“As activity rises, you start to see a momentum effect.”

“The more people you see moving south and talking about the lifestyle benefits, the more that reinforces itself.”

That trend is evident across Otago and Canterbury, where strong employment opportunities, outdoor recreation and comparatively affordable housing continue to attract buyers.

In Canterbury, Christchurch remains one of New Zealand’s most affordable major cities relative to incomes, while offering significant employment opportunities and modern infrastructure following years of post-earthquake rebuilding.

Lee says the city still represents compelling value when compared with Auckland.

“If you compare prices in Christchurch to Auckland, Christchurch is still significantly cheaper, and it has a good range of housing available.

“It’s still got plenty of runway before we start talking about it reaching parity with Auckland.”

 

LIFESTYLE MEETS AFFORDABILITY

One of the key questions raised by the recovery is whether buyers are being drawn to these regions primarily for affordability or lifestyle.

Lee believes the answer is both.

“I think those things go hand in hand.

“When people talk about lifestyle in the South Island, there are a number of factors at play.

“You’ve got places such as Queenstown and Wānaka that offer incredible scenery and recreational opportunities. But there’s also the lifestyle that comes from lower house prices in locations like Canterbury and Southland, lower traffic volumes and shorter commutes.”

“There are a wide range of factors that make these smaller centres attractive compared with larger cities.” The shift reflects a broader change in how many New Zealanders view housing and location.

Remote and hybrid working arrangements have given more people flexibility around where they live, while rising house prices in larger centres have encouraged buyers to consider alternative markets offering better value.

That combination appears to be supporting demand across many regional centres.

 

WHY SOME REGIONS ARE STILL LAGGING

While 19 districts have recovered, the majority of New Zealand’s housing markets remain below their previous highs.

Lee says that doesn’t necessarily signal weakness.

Instead, it reflects a recovery process that is taking longer than many initially expected.

“The recovery is simply taking longer because there has been a build-up of housing stock available for sale, particularly in Auckland and Wellington.”

“South Island markets have generally experienced less of that supply build-up.”

The increase in available housing stock has provided buyers with greater choice and reduced upward pressure on prices.

At the same time, several external factors have interrupted improving market confidence.

“Earlier this year we actually had quite good confidence and momentum building in the housing market,” says Lee.

“But then you get another unexpected event that disrupts sentiment.

“We’ve seen interest rate movements and more recently global oil-related concerns affect confidence.”

Despite these headwinds, Lee remains optimistic about the broader outlook.

“I wouldn’t be worried.”

“This is more a case of some markets recovering faster than others.”

 

VALUE STILL EXISTS IN RECOVERING REGIONS

For buyers considering their next move, the question is whether recovering regions still represent good value, or whether greater opportunities lie in markets yet to rebound.

Farhi believes many of the recovering regions continue to offer attractive fundamentals.

“I think the South Island generally offers good value.”

“In most parts of the South Island, the value proposition remains very strong.”

Queenstown Lakes is perhaps the exception.

The district has continued to record strong growth despite already having some of New Zealand’s highest house prices. “Queenstown has obviously become very expensive,” says Farhi.

“I’ve personally been surprised it has continued to rise because I would have thought it had reached its limits a few years ago.

“But that market has strong momentum and continues to attract people who want to live there because of the scenery and lifestyle.”

For many buyers, however, centres such as Christchurch, Dunedin and parts of Southland continue to provide a more accessible pathway into home ownership while still offering long-term growth potential.

 

WHAT COMES NEXT?

Predicting which regions will lead the next phase of the recovery is far from straightforward.

Farhi is cautious about making forecasts, but believes Auckland remains one market worth watching.

“Auckland has traditionally been the area that receives the strongest migration flows.”

“When people arrive from overseas, Auckland is usually their first destination.”

“Migration has been relatively quiet for a period, but it is starting to recover. If that trend continues, we could start to see more activity returning to the larger centres.”

He also points to the Waikato and Bay of Plenty as regions that could benefit from strong agricultural sector performance and population growth.

For now, however, the strongest evidence lies in the districts already demonstrating recovery.

The fact that nearly one-third of New Zealand’s territorial authorities have now recorded positive growth since their post-pandemic lows suggests the market’s recovery is underway, even if it is unfolding unevenly.

For homeowners, buyers and investors alike, the message is clear: location matters more than ever.

While national averages often dominate headlines, it is the regional stories, particularly those emerging from the South Island, that are increasingly shaping New Zealand’s housing landscape.